Oil trades with ‘caution and uncertainty’ as Trump announces new strategy on Iran

President Trump makes a statement on the administration's strategy for dealing with Iran in the White House, October 13, 2017.

Prices of oil traded with “caution and uncertainty,” Friday, pulling back from sharper gains earlier in the session as traders mulled the outcome of President Donald Trump’s decision to decertify the Iran nuclear agreement.

On Friday, November West Texas Intermediate crude
CLX7
rose 85 cents, or 1.7%, to settle at $51.45 a barrel on the New York Mercantile Exchange, ending near the highs seen before Trump’s announcement.

December Brent crude
UK:LCOZ7
added 92 cents, or 1.6%, to finish at $57.17 a barrel on ICE Futures Europe.

“I think it is just buy the rumor and sell the fact,” said James Williams, energy economist at WTRG Econommics. “This just doesn’t appear to have an impact on Iranian production. We need to see how congress reacts in the next 60 days.”

Trump laid out a new strategy to deal with Iran and warned that he could cancel U.S. participation in the nuclear pact at any time. The strategy includes placing additional sanctions on the Iran regime to block its “financing of terror,” said Trump.

Senior officials had already said that Trump won’t certify that Iran is complying with the nuclear deal.

Prices are likely to mostly trade with “caution and uncertainty,” said Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies.

“Trump has to deal with a hostile Congress, hostile U.S. businesses, and a hostile security council—meaning that it is likely to be mostly bluster as he is forced to eventually back down,” he said. “Markets realize this, but the ‘anything can happen’ effect will give prices the upwards nudge.”

A good hint on what’s to come in the wake of the Iran announcement is the North Korea situation, said Al-Ubaydli: “so far, tough words but minimal action.”

Williams said that so far, the Iran deal has “helped Iran with additional foreign investment and oil and gas equipment.”

But there shouldn’t be any effect on Iranian oil exports, he said. “In terms of trade, at least for now, Europe will ignore a refusal to certify compliance.”

Trump Denounces Iran as a 'Rogue Regime'

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President Donald Trump announced plans on Friday to decertify the Iran Nuclear Deal, reinforcing his commitment to cancel the agreement if congress doesn't act on whether to reimpose sanctions on Iran. Photo: Getty Images